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Israel is threatening to withhold permission for a second Palestinian cellular phone network if the Palestinian Authority (PA) does not withdraw its call for the International Criminal Court (ICC) to look into allegations of Israeli war crimes in Gaza, a leading Israeli newspaper said on Sunday.

Tel Aviv-based Haaretz quoted Israeli security sources saying that the PA’s appeal to the ICC in The Hague has incensed military leaders. Chief of Staff Gabi Ashkenazi is reportedly withholding his approval for mobile provider Wataniya because of the legal petition.

Israel’s armed forces killed more than 1,400 Palestinians during the three-week long offensive against the Gaza Strip last winter. Hundreds of women and children were among the dead. UN investigators, along with Israeli and Palestinian human rights groups have accused Israel of violating the laws of war during the attack.

The introduction of Wataniya is a project championed by caretaker Prime Minister Salam Fayyad, who has focused on building up the private sector in the West Bank. In spite of support from international figures such as Quartet Envoy Tony Blair, the project has been delayed for months.

If the project is not approved by 15 October, Haaretz reports, the PA will be forced to pay a penalty estimated at $300 million, the sum that has already been invested in licensing and infrastructure.

Israel is also complaining that the frequencies sought for civilian use by Wataniya are close to those used by the Israeli military, the report states.

In addition, Haaretz’ sources say that it received signals from the PA at the time of the Gaza offensive to “step up the pressure on Hamas, and even to attempt to bring its rule in the territory to the point of collapse. However, at a later stage they joined those decrying Israel and its alleged actions in the Strip.”

"The PA has reached the point where it has to decide whether it is working with us or against us," a senior Israeli military official is quoted as saying.

In turn, the newspaper states that PA sources believe that Fayyad and President Mahmoud Abbas may water down their appeal to the ICC, but will not drop the case entirely.